The Goods and Services Tax: Is It Unacceptable to Accept?

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Bhartiya Janata Party (BJP) has been nothing but a hypocrite. There used to be a time when they were adamantly against the Goods and Services Tax (GST).

Jai Ho Bharatiya Rajneeti!

India under Modiji’s rule has been going through historic changes. From a booming majority of saffron across state and local elections to the purple of the (in)famous demonetization, BJP has rarely left scope or spotlight for the others. Just when India finally started standing on its feet again post demonetization, GST came along.

It is no secret that Modiji has a flair for theatrics. This time, he followed none other than Jawaharlal Nehru. GST, considered to be the mother of all tax reforms, was launched at the stroke of midnight, and how.

The question that has been haunting not one, but millions, is: What is GST and what does it offer to the aam aadmi?

No, GST is not Government nu Sarvasresht Trahimam as your WhatsApp chats might suggest. It stands for Goods and Services Tax. It is believed to be India’s biggest tax reform post-Independence and is set to revolutionise the tax structure in the largest democracy of the world. As of March 2014, there were 12, 76,861 service tax assesses in the country. But after June 30th, 2017, there will be just one.

GST (or its equivalent) has been implemented in countries like France, Canada, and over a hundred and sixty other countries before India. What were the effects of such a tax structure in those countries? Let us take a look:

Singapore: Inflation spiked instantly. But after the initial reservations, consumer confidence increased and today, GST has become the second largest source of the government’s revenue.

Malaysia: Just like in Singapore, short-term effects included a spike in inflation. Consumer confidence nose-dived. But later on, over seventy percent residents reported the Malaysian equivalent of GST to be efficient.

In Australia, due to its smooth implementation, there are plans to increase the tax slab to 15% from the existing 10%.

Talking about the Indian context, in the budget for 1986-87 the then Finance Minister, Vishwanath Singh proposed a major overhaul of the excise taxation structure. In the year 2000, Prime Minister Atal Bihari Vajpayee set up a committee to design GST. The idea of GST was put forward by Kelkar committee on tax reforms in 2004. The committee suggested, “GST would be an all India level tax.” And after 17 years of surviving as an idea, the NDA government finally launched the Goods and Services Tax.

The solitary indirect tax aims to revolutionise the labyrinthine tax structure as it would do away with the problem of multiplicity of tax laws and the unfair cascading of taxes. It would subsume and merge indirect taxes imposed by the central and various state governments. It will be a dual tax in the form of Central GST and State GST, imposed on every commodity and services with revenues shared between the Centre and states in the ratio agreed upon by both the parties.

GST is expected to boost competitiveness and performance in India’s manufacturing sector. The pharmaceutical and healthcare industry will also benefit from the GST. Because of the simplified tax structure, millions of people will be able to access affordable healthcare. Because GST removes individual state taxes, prices of mobile handsets will decrease. The transparency and accountability in the real estate sector would see substantial benefits.

It will lead to prevention of unhealthy competition among states. Due to the removal of the interstate barriers, free flow of goods will be smooth and services are likely to reduce costs pertaining to logistics. Hopefully, the introduction of GST will finally pave way for “One Nation, One Market.”

Its effect will vary on whether the industry deals with manufacturing, distributing and retailing. Like every other change of such a large magnitude, there will certainly be implementation challenges. Some of the hurdles include lack of adaptation, trained staff and a distinct mechanism to curb tax evasion. But that is the nature of a reform. It is not easy.

I remember quite vividly. When Arun Jaitley presented the first budget of the newly elected NDA government, he was accused of being unimaginative. His reforms were not a “big bang.” In the past year, the government has carried out exactly what the critics wanted. “Big Bang” reforms. Then why is it that the government is still criticised?

I agree that criticism is the very essence of democracy. If a party is in power, it is only legitimate to face criticism from citizens with opposite ideologies or the media. That is how a democracy functions. Through checks and balances. But, once in a while, just once in a while, should we not acknowledge if the government takes such a monumental step toward fixing what is broken? Do we have to criticise, just for the sake of it? Is it unacceptable to accept?

We do not fail to bring up other challenges that we, as a nation, face. I agree, there are many wrongs that need to be set right. Yes, lynching in the name of cows is not right. Yes, rapes are still a problem. Yes, do hazaar ka change nahin milta.

But let us face it, a country that has been mired in stagnancy for sixty years, cannot completely pull itself up over merely three years. Despite India being one of the oldest democracies, we still have a long way to go. We are nowhere close to the India of our dreams.

The Goods and Services Tax might be a solution to just one problem. But it is still a step. Let us give credit where it is due.

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